The recently appointed managers of the re-launched Keystone Positive Change Trust have revealed that flying taxi companies are among some of the investments they are considering for the portfolio.
Managers Kate Fox and Lee Qian are running the trust in line with their £2.2bn Baillie Gifford Positive Change strategy, which is one of the top performing funds in the IA Global sector over recent years.
One major difference between the Keystone Positive Change trust and the open-ended strategy is that the trust is allowed to invest in private companies.
“We believe this is able to open up our investable universe and allow us to invest in a range of very exciting businesses,” Qian said. “Our aim over the next three years is to allocate somewhere between five to 10 per cent of the trust towards private companies and have a long-term cap at 30 per cent.
“We're extremely excited by this new way of investing that the investment trust affords us.”
Baillie Gifford has invested in many private companies over the years, having put over $5.4bn towards over 90 private companies such as SpaceX and Airbnb.
“We have been working with the private companies team on an ongoing basis whilst we've been investing just in public companies,” Fox revealed.
She said it has provided the team with an advantage in understanding what disruptive technologies are coming through the private markets pipeline and how they could impact public companies.
“But we're really excited about as being able to work with them more closely as we're now able to invest in that area,” she said.
“I think we're in a fantastically fortunate position of being so well resourced in this area of impact, both as a team ourselves and being able to leverage resources elsewhere at Baillie Gifford.
“There's a huge range of different types of companies that are on our radar in that area.”
Fox mentioned several private companies that Baillie Gifford as a firm already holds across its portfolios that are being considered for the Keystone Positive Change trust.
Some of the companies Fox said were under consideration include those that are developing new sustainable fibres to help address the huge environmental impact of the fast fashion industry.
Clues can be found within the £16.6bn Scottish Mortgage Investment Trust, which already holds stakes in Ginkgo Bioworks – a company that uses genetic engineering to produce bacteria with industrial applications - and Bolt Threads - which uses spider silk to make sustainable fibres.
Perhaps the most fascinating possible investments Fox alluded to were “companies that are helping change the mobility system in the long term”.
“What about flying taxis?” she asked. “Or the more technical term – eVTOLs or electric vertical take-off and landing vehicles. They could really transform mobility in the decades ahead and help improve the environmental angle of mobility, economics more broadly and also general wellbeing.”
One such company Baillie Gifford has already invested in is German electric aviation start-up Lilium, which aims to fly an all-electric, five-seater city-to-city air shuttle by 2025.
Baillie Gifford is also an investor in Lilium’s California-based rival Joby - backed by Japanese car manufacturer Toyota - which is developing eVTOL aircraft to operate as an air taxi service.
In February of this year the company announced its plans to go public through a SPAC (Special Purpose Acquisition Vehicle) to raise $1.6bn, valuing it at $6.6bn.
Whilst some of these investments in the private markets may eventually go public at billion-dollar valuations, one other important difference between the Keystone Positive Change trust and its open-ended counterpart is its ability to invest in already publicly listed companies in the small-cap, less liquid space.
Indeed, Fox used to work for Baillie Gifford’s global smaller companies department, the Global Discovery team.
Whilst the open-ended strategy has 34 companies, Keystone Positive Change will be able to invest in up to 60 companies, many of which the additional ones will likely be private or small-caps.
However, the investment mandate will remain the same, with two main objectives: to deliver attractive investment returns, and to help contribute towards a more sustainable world for current and future generations.
Fox argued that these two objectives were “complimentary, not contradictory” and that “purpose complements profits”.
While Fox did say there is a natural 25 per cent overlap with the holdings of Scottish Mortgage, she believes it is genuinely different due to its second objective.
“We're looking to manage the portfolio to deliver both attractive investment returns and impact,” she said. “So that means there are no compromises any company that makes it into the portfolio has got to meet both objectives won't relinquish one or the other.”
Fox did reveal two additional holdings the strategy has added recently to address the world’s agricultural challenges.
“There are around 800 million people that are currently undernourished, but at the same time agriculture has a huge impact on our environment,” Fox explained. “It is responsible for around about 20 per cent of carbon emissions, 70 per cent of world water consumption, and is the leading contributor to biodiversity loss.”
The first company she mentioned was American agriculture equipment manufacturer John Deere.
Share price performance of John Deere over 5yrs
Source: Google Finance
“What really excites us about John Deere is its precision agricultural technology, which is enabling farmers to do more with less,” Fox said.
“It’s got a ‘See and Spray’ technology which through machine vision and sensors is able to distinguish between what is weed, and what is plant.”
This allows farmers to apply herbicides to just the weeds and use 77 per cent less herbicide, which is better for the farmers and the environment.
The second company she mentioned was the plant-based meat substitutes producer Beyond Meat.
“This is really trying to transform the way we eat our food,” Fox said. “They're trying to make a plant-based protein, which isn't just attractive to vegetarians, but also to meat eaters.
“I think it's striking that in the supermarkets where customers can buy their products, 90 per cent of them also purchase meat.”